Toyota, Mazda agree on $1.6 billion tie-up, will cooperate on EVs

Automakers seek edge amid changing market

In a bid to accelerate joint production in the United States and develop electric vehicles in a world moving away from fossil fuels, Toyota Motor Corp. and Mazda Motor Corp. agreed Friday to form a capital alliance.

The move by the nation’s biggest automaker and Mazda is seen as a hedge against intensifying global competition to build cars that meet stricter emissions and environmental standards while reining in growing costs.

“With the future of the industry in mind, in addition to leveraging their individual strengths to further improve technologies and reinforce their business foundations, Toyota and Mazda aim to deepen collaboration and achieve sustainable growth through their partnership, rising to face and overcome these pressing challenges,” Toyota said in a statement.

The companies will cooperate in the U.S. market to launch a joint venture, aiming to build a large factory by 2021 that can produce up to 300,000 of Mazda’s sport utility vehicles and Toyota’s Corolla models per year, the automakers said.

They said they will invest some $1.6 billion to build the new U.S. plant and create 4,000 jobs.

“Rather than conflicting with each other, it is essential that we seek partners that can compete and collaborate from a wide point of view,” as the industry sees new players like Google, Apple and Amazon emerging from new fields, Toyota President Akio Toyoda said during a Friday news conference in Tokyo.

Toyota will take a 5.05 percent stake in Mazda for ¥50 billion while Mazda will take 0.05 percent stake in Toyota.

Some experts see the partnership as a win for both companies.

For Mazda, a tie-up with Toyota will give it access to the larger company’s technologies, particularly for environmentally friendly vehicles such as electric cars, hybrids and those that use fuel cells, said Takaaki Sugiura, principal researcher at Mitsubishi Research Institute.

“Mazda has been focused on developing internal combustion and diesel engines. And given its size of sales, it is difficult to invest in research and development (on technologies for environmentally friendly cars) as much as Toyota does,” he said. “So, it’s a bonus for Mazda if it can access Toyota’s technologies.”

Many countries are looking to impose stricter regulations to lower carbon emissions, so more EVs running on roads in the coming years is an irreversible trend, Sugiura said.

Toyota is aiming to fully enter the EV market by 2020 and Mazda is looking to start selling EVs in the United States in 2019.

Meanwhile, Mazda is known for producing cars with more stylish designs, an area where Toyota is lacking, so the smaller automaker’s expertise could benefit Toyota by expanding its cachet with consumers, Sugiura said.

Such alliances are a trend in the industry, where going it alone to survive is becoming ever more difficult, particularly in light of the need to produce new technologies to meet the world’s changing demands.

Last year, Nissan Motor Co., took a 34 percent stake in scandal-hit Mitsubishi Motors, effectively putting the troubled company under its wing.

Following that move, Toyota and Suzuki Motor Corp., which specializes in smaller vehicles, announced that they too would seek a partnership.

The situation is much the same globally.

The Renault-Nissan alliance became the world’s top auto-seller for the first time after its addition of Mitsubishi Motors. Toyota has fallen to third place in global sales in the first six months of this year, behind Germany’s Volkswagen group.

The capital tie-up between Toyota and Mazda is an indication that the auto industry will see more reorganizations in the face of tougher competition.

In May 2015, the two automakers announced that they reached a basic agreement on a partnership, saying that they would form a committee to look for areas in the industry where they could cooperation and work together.

Before that announcement, Mazda had been producing Toyota’s compact cars at its Mexico plant.

Later in the day, U.S. President Donald Trump used a tweet to hail the automakers’ new investment.

“Toyota & Mazda to build a new $1.6 B plant here in the U.S.A. and create 4K new American jobs. A great investment in American manufacturing!” he said on his Twitter account.